Spindr0, I understand why you do not agree with buy and hold, but put your feet in the shoes of an average American. They do not know much if anything about finance or the stock market. How are they going to do anything but buy and hold? They want exposure to the equity market, which, has historically yielded the highest returns over long periods of time of any asset class. So how are they going to get that exposure. They cannot trade or pick stocks, because they do not have the time nor the inclination to learn, and besides few succeed at it. They can try in their spare time, but then they end up blindly following people like Jim Cramer. We both know how that could end. They can give their money to some one else to trade, like a hedge fund, but how do they choose. Most hedge funds underperform the market, and incur extremely high costs. And what if the person they choose turns out to be the next Bernie? It may seem stupid to you and me to give our money blindly to a guy like Bernie Madoff, but the average working American, like a carpenter, nurse, or prostitute doesn't know much better because they have limited financial knowledge. So what are they to do? The only possible rout to take is buy and hold. Maybe choose a mutual fund, maybe just buy an etf that tracks the market. In either case if they hold for a VERY VERY long time the odds are greatly on their side that they will outperform every other asset class, and they don't even have to do any work. They may not do as well as the guy who can successfully trade, but then again Mr. Joe the carpenter or Ms. Jane the prostitute do not want to choose trading as their career or even their hobby. Thats why buy and hold works for most Americans, not you or me, but most people.
Jesus has hit the nail on the head. In my view, such an investor would be better to avoid managed mutual funds (which have underperformed historically) and stick to index trackers. Index trackers avoid stock specific risk and can be said to "self adjust" as far as the investor is concerned - underperformers drop out of the relevant index and outperformers are added. The next question is whether Jo Public can add an overlay of a simple timing system - he may not make any more money and he may end up paying more taxes. But it may enable him to avoid stomach churning draw downs.